GRAND FORKS, NORTH DAKOTA Audit Report

CLIENT CODE 123

Cl i en t Cod e 23 0

ROBERT R. PETERSON STATE AUDITOR

UNIVERSITY OF NORTH DAKOTA

GRAND FORKS, NORTH DAKOTA

Audit Report F o r t h e B i e n n i u m E n d e d

J u n e 3 0 , 2 0 1 5

LEGISLATIVE AUDIT AND FISCAL REVIEW COMMITTEE MEMBERS

Senator Jerry Klein – Chairman

Representative Chet Pollert – Vice Chairman

Representatives

Patrick Hatlestad Jerry Kelsh

Keith Kempenich Lawrence R. Klemin

Gary Kreidt Andrew G. Maragos

Bob Martinson Corey Mock Mike Nathe

Marvin E. Nelson Robert J. Skarphol

Senators

Judy Lee

David O'Connell

Contents

Transmittal Letter 1

Executive Summary 2

Introduction 2

Responses to LAFRC Audit Questions 2

LAFRC Audit Communications 3

Audit Objectives, Scope, and Methodology 4

Discussion and Analysis 5

Financial Summary 5

Analysis of Significant Changes in Operations 6

Analysis of Significant Variances - Budgeted and Actual Expenditures 6

Financial Statements 7

Statement of Net Position 7

Statement of Revenue, Expenses, and Changes in Net Position 8

Statement of Cash Flows 9

Statement of Appropriations 11

Internal Control 14

Compliance With Legislative Intent 15

Operations 17

STATE AUDITOR ROBERT R. PETERSON

Phone (701)239-7250 Fax (701)239-7251

STATE OF NORTH DAKOTA

OFFICE OF THE STATE AUDITOR FARGO BRANCH OFFICE

1655 43rd STREET SOUTH, SUITE 203 FARGO, NORTH DAKOTA 58103

University of North Dakota Audit Report 1 Biennium Ended June 30, 2015

Transmittal Letter

March 24, 2016 The Honorable Jack Dalrymple, Governor

Members of the North Dakota Legislative Assembly

State Board of Higher Education

Mr. Edward Schafer, Interim President, University of North Dakota

We are pleased to submit this audit of the University of North Dakota for the year ended June 30, 2015. This audit resulted from the statutory responsibility of the State Auditor to audit or review each state agency once every two years. The same statute gives the State Auditor the responsibility to determine the contents of these audits. In determining the contents of the audits of state agencies, the primary consideration was to determine how we could best serve the citizens of the state of North Dakota. Naturally we determined financial accountability should play an important part of these audits. Additionally, operational accountability is addressed whenever possible to increase efficiency and effectiveness of state government. The in-charge auditor and audit manager for this audit was Robyn Hoffmann, CPA. Inquiries or comments relating to this audit may be directed to the audit manager by calling (701) 239-7291. We wish to express our appreciation to President Schafer and his staff for the courtesy, cooperation, and assistance they provided to us during this audit.

Respectfully submitted,

Robert R. Peterson State Auditor


Executive Summary

Introduction

The University of North Dakota was founded in 1883 and is a member of the North Dakota University System. It serves the state, the country, and the world community through teaching, research, creative activities, and service. State assisted, the University’s work depends also on federal, private, and corporate sources. With other research universities, the University shares a distinctive responsibility for the discovery, development, preservation, and dissemination of knowledge. Through its sponsorship and encouragement of basic and applied research, scholarship, and creative endeavor, the University contributes to the public well-being. The University maintains its original mission in liberal arts, business, education, law, medicine, engineering, and mines; and has also developed special missions in nursing, fine arts, aerospace, energy, human resources, and international studies.

The Legislative Audit and Fiscal Review Committee (LAFRC) requests that certain items be addressed by auditors performing audits of state agencies. Those items and the Office of the State Auditor’s responses are noted below.

Responses to LAFRC Audit Questions

1. What type of opinion was issued on the financial statements?

The financial statements for the University of North Dakota were included in the Annual Financial Report of the North Dakota University System; an unmodified opinion was issued on the annual financial report of the North Dakota University System.

2. Was there compliance with statutes, laws, rules, and regulations under which the agency was created and is functioning?

Yes.

3. Was internal control adequate and functioning effectively?

Yes.

4. Were there any indications of lack of efficiency in financial operations and management of the agency?

No.

5. Has action been taken on findings and recommendations included in prior audit reports?

Yes, all recommendations included in the prior audit report were implemented.

6. Was a management letter issued? If so, provide a summary below, including any recommendations and the management responses.

No.


LAFRC Audit Communications

7. Identify any significant changes in accounting policies, any management conflicts of interest, any contingent liabilities, or any significant unusual transactions.

There were no management conflicts of interest or significant unusual transactions, however in fiscal year 2015, the University of North Dakota changed accounting policies related to pensions by adopting GASB Statement No. 68, Accounting and Financial Reporting for Pensions.

8. Identify any significant accounting estimates, the process used by management to formulate the accounting estimates, and the basis for the auditor’s conclusions regarding the reasonableness of those estimates.

The most significant accounting estimates used by the University of North Dakota include useful lives of capital assets and allowance for uncollectible receivables. Estimated useful lives are used to compute depreciation on capital assets and are based on industry standards and experience. Management’s estimate of the allowance is based on aging categories and past history. We evaluated the key factors and assumptions used to develop the estimated useful lives and allowances in determining that they are reasonable in relation to the financial statements taken as a whole.

9. Identify any significant audit adjustments.

In fiscal year 2014, the University of North Dakota had a significant posted audit adjustment of $31.6 million to reclassify recharge center expense between cost of goods sold and other supplies. In fiscal year 2015, significant audit adjustments were not necessary.

10. Identify any disagreements with management, whether or not resolved to the auditor’s satisfaction relating to a financial accounting, reporting, or auditing matter that could be significant to the financial statements.

None.

11. Identify any serious difficulties encountered in performing the audit.

None.

12. Identify any major issues discussed with management prior to retention.

This is not applicable for audits conducted by the Office of the State Auditor.

13. Identify any management consultations with other accountants about auditing and accounting matters.

None.

14. Identify any high-risk information technology systems critical to operations based on the auditor’s overall assessment of the importance of the system to the agency and its mission, or whether any exceptions identified in the six audit report questions to be addressed by the auditors are directly related to the operations of an information technology system.

ConnectND Finance, Human Resource Management System (HRMS), and Campus Solutions are high-risk information technology systems critical to the University of North Dakota. No exceptions related to the operations of an information technology system were noted.


Audit Objectives, Scope, and Methodology

Audit Objectives

The objectives of this audit of the University of North Dakota for the biennium ended June 30, 2015 were to provide reliable, audited financial statements and to answer the following questions:

1. What are the highest risk areas of the University of North Dakota’s operations and is internal control adequate in these areas?

2. What are the significant and high-risk areas of legislative intent applicable to the University of North Dakota and are they in compliance with these laws?

3. Are there areas of the University of North Dakota’s operations where we can help to improve efficiency or effectiveness?

Audit Scope

This audit of the University of North Dakota is for the biennium ended June 30, 2015. We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

The University of North Dakota’s sole location is its Grand Forks campus which was included in the audit scope.

Audit Methodology

To meet the objectives outlined above, we:

Prepared condensed financial statements from the fiscal years 2015 and 2014 annual financial reports of the North Dakota University System and developed a discussion and analysis of the financial statements.

Performed detailed analytical procedures including computer-assisted auditing techniques. These procedures were used to identify high-risk transactions and potential problem areas for additional testing.

Tested internal control and compliance with laws and regulations which included selecting representative samples to determine if laws were being followed consistently. Non-statistical sampling was used and the results were projected to the population. Where applicable, populations were stratified to ensure that particular groups within a population were adequately represented in the sample, and to improve efficiency by gaining greater control on the composition of the sample.

Tested potential improvements to operations.

Reviewed segregation of duties in all program areas.

Interviewed appropriate agency personnel.

Queried the ConnectND (PeopleSoft) system. Significant evidence was obtained from ConnectND.

Observed the University of North Dakota’s processes and procedures.

In aggregate there were no significant limitations or uncertainties related to our overall assessment of the sufficiency and appropriateness of audit evidence.


Discussion and Analysis

The accompanying financial statements have been prepared in a condensed form to present the University of North Dakota’s financial position and results of operations in a manner similar to that used for financial reporting in the private sector. Also, the related note disclosures have not been included in this report. Accordingly, the accompanying financial statements are not intended to be presented in accordance with generally accepted accounting principles (GAAP).

For the biennium ended June 30, 2015, operations of the University of North Dakota were primarily supported by appropriations from the state’s general fund, student tuition and fees, federal grants and contracts, sales and services of educational departments, and auxiliary enterprises.

Financial Summary

Total assets increased $75 million in fiscal year 2015 due to various factors:

Cash and cash equivalents decreased $24 million due to spending $15 million bond proceeds for Wilkerson Hall and the reinvestment of $10 million from cash to investments.

Due from state general fund increased $11 million for an appropriation receivable for the School of Medicine Health Science facility project.

Capital assets increased $86 million primarily due to the construction of the School of Medicine Health Science facility project for $55 million, the Law School addition for $10 million, the Indoor Practice facility for $11 million, and the Wilkerson Hall addition for $16 million.

Deferred Outflows of Resources and Deferred Inflows of Resources each increased $5.7 million due to the implementation of GASB 68, relating to pensions.

Total liabilities increased $27 million in fiscal year 2015 because the University of North Dakota recorded a $29 million pension liability due to the implementation of GASB 68, relating to the recognizing of pensions liabilities and expense.

Total revenues were $519,399,276 for the year ended June 30, 2015 compared to $462,818,910 for the year ended June 30, 2014. The $57 million increase is primarily due to $49 million state appropriations for capital assets and $9 million for capital grants and gifts. State appropriations for capital assets included $8.8 million for the Law School renovation and $41 million for the School of Medicine Health Sciences facilities project. Capital grants and gifts included $5.3 million for the Indoor Practice facility and $1.7 million for the Law School renovation. Capital grants and gifts revenue was from the UND Alumni Association and Foundation.

Total expenses for the University of North Dakota were $442,486,781 for the year ended June 30, 2015 as compared to $431,347,506 for the prior year. The $11 million increase in total expenses for the audited period is primarily due to operating expenses which includes:

$2.4 million increase in recharge fees for the Memorial Union, McCannel Hall, and Upson II Lab renovations; and

$10.5 million adjustment to correct interdepartmental revenue.


Analysis of Significant Changes in Operations

There were no significant changes in operations.

Analysis of Significant Variances - Budgeted and Actual Expenditures

There were no significant variances between budgeted and actual expenditures.


Financial Statements

Statement of Net Position June 30, 2015 June 30, 2014

ASSETS

Cash and cash equivalents 40,242,565$ 63,899,706$

Investments 112,634,222 103,490,307

Accounts receivable, net 8,937,610 11,998,220

Due from component units 7,810,349 4,540,289

Due from other NDUS 645,074 3,901,576

Due from state general fund 16,843,312 5,507,535

Grants & contracts receivables, net 10,213,502 12,980,701

Inventories 4,043,804 4,075,287

Notes receivable, net 20,321,989 21,599,467

Other assets 1,625,399 2,110,273

Unamortized bond discount 210,207 219,807

Capital assets, net 473,841,485 387,930,688

Total assets 697,369,518$ 622,253,856$

DEFERRED OUTFLOWS OF RESOURCES

Deferred outflows of resources 6,627,004$ 976,937$

Total deferred outflows of resources 6,627,004$ 976,937$

LIABILITIES

Accounts payable 17,013,754$ 15,388,841$

Due to component units 9,860,136 10,251,839

Accrued payroll 13,723,426 12,319,141

Unearned revenue 10,510,768 9,258,009

Deposits 2,811,543 2,623,195

Pension liability 29,432,374

Other liabilities 3,115,961 3,232,447

Due to others 119,591,922 125,488,851

Total liabilities 206,059,884$ 178,562,323$

DEFERRED INFLOWS OF RESOURCES

Deferred inflows of resources 5,745,319$

Total deferred inflows of resources 5,745,319$

NET POSITION

Invested in capital assets 360,883,304$ 285,648,784$

Restricted for:

Nonexpendable:

Scholarships and fellowships 14,251,497 14,570,498

Expendable:


Research 3,541,958 4,106,918

Institutional 16,863,988 14,875,688

Loans 27,566,024 27,069,767

Debt service 3,690,276 3,670,690

Unrestricted 63,760,541 93,139,249

Total net position 492,191,319$ 444,668,470$


Statement of Revenue, Expenses, and Changes in Net Position

June 30, 2015 June 30, 2014

REVENUES AND OTHER ADDITIONS

Student tuition and fees 130,819,271$ 128,806,561$

State appropriations 108,236,618 101,623,783

State appropriations-capital assets 68,460,994 19,139,744

Federal grants and contracts 64,193,331 68,041,904

Sales and services of educational departments 50,898,669 47,831,285

Auxiliary enterprises 34,524,589 34,243,346

Nongovernmental grants and contracts 18,398,847 23,964,338

Capital grants and gifts 15,762,881 6,883,081

State and local grants and contracts 10,426,034 10,888,226

Gifts 9,283,529 9,079,004

Tax revenues 3,576,588 2,895,497

Investment income 1,822,333 4,443,080

Other nonoperating revenues 1,498,613

Gain on capital assets 1,031,103

Other 745,787 697,245

Insurance proceeds 20,089 196,211

Inter-institutional transfers 4,085,605

Total revenues and other additions 519,699,276$ 462,818,910$

OPERATING EXPENSES

Salaries and wages 296,888,737$ 289,172,631$

Operating expenses 100,350,958 87,222,682

Depreciation 21,189,980 21,384,633


Cost of sales and services 6,583,010 16,015,799

Interest on capital asset-related debt 5,283,410 4,893,760

Data processing 5,108,082 4,566,386

Inter-institutional transfers 426,881

Loss on capital assets 625,962

Other nonoperating expenses 954,319

Total operating expenses 442,486,781$ 431,347,506$

Revenue over expenses 77,212,495$ 31,471,404$

NET POSITION

Net Position-beginning of the year, as restated 414,978,824$ 413,197,066$

Net Position-end of the year 492,191,319$ 444,668,470$


Statement of Cash Flows June 30, 2015 June 30, 2014

CASH FLOWS FROM OPERATING ACTIVITIES

Student tuition and fees 131,332,886$ 129,571,969$

Grants and contracts 87,426,946 91,795,488

Payments to suppliers (107,641,896) (102,670,732)

Payments to employees (295,627,688) (288,794,256)

Payments for scholarships and fellowships (6,655,723) (6,511,334)

Loans issued to students (3,522,794) (3,408,373)

Collection of loans to students 4,704,405 3,488,942

Auxiliary enterprise charges 34,450,924 34,326,870

Sales and service of educational departments 53,919,163 48,757,165

Cash received (paid) on deposits (69,105) 145,550

Other receipts (payments) (6,682,322) 2,943,516

Net cash used by operating activities (108,365,204)$ (90,355,195)$

CASH FLOWS FROM NONCAPITAL

FINANCING ACTIVITIES

State appropriations 108,236,618$ 101,623,783$

Grants and gifts received for other than capital purposes 18,728,446 20,303,901

Direct lending receipts 94,816,298 69,245,831

Direct lending disbursements (94,627,231) (69,226,230)

Agency fund cash decrease 45,179 (891,275)

Tax revenues 3,576,588 2,895,497

Net cash flows provided by noncapital

financing activities 130,775,898$ 123,951,507$

CASH FLOWS FROM CAPITAL AND RELATED

FINANCING ACTIVITIES

Proceeds from issuance of debt 45,235,000$

Capital appropriations 57,125,217$ 15,500,604

Capital grants and gifts received 15,520,411 3,571,902

Proceeds from sale of capital assets 2,171,351 655,800

Purchases of capital assets (100,077,892) (46,245,982)

Insurance proceeds 135,766 8,995

Principal paid on capital debt and lease (8,358,417) (15,786,532)

Deferred gain on refunding of debt 1,746

Interest paid on capital debt and lease (5,268,923) (3,302,984)

Net cash used by capital and related

financing activities (38,752,487)$ (361,451)$

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sales and maturities of investments 152,250,000$ 87,250,000$

Interest on investments 2,684,657 2,650,215

Purchase of investments (162,250,005) (72,250,006)

Net cash provided (used) by investing activities (7,315,348)$ 17,650,209$

Net increase (decrease) in cash (23,657,141)$ 50,885,070$

CASH - BEGINNING OF YEAR 63,899,706$ 13,014,636$

CASH - END OF YEAR 40,242,565$ 63,899,706$

(Continued on next page)


(Continued from previous page)

RECONCILIATION OF NET OPERATING EXPENSES June 30, 2015 June 30, 2014

TO NET CASH USED BY OPERATING ACTIVITIES

Operating loss (136,511,330)$ (121,770,104)$

Adjustment to reconcile net loss to net cash

used by operating activities

Depreciation expense 21,189,980 21,384,633

Other nonoperating revenues 1,067,785 2,591,602

Change in assets and liabilities

Accounts receivable adjusted for interest receivable 2,875,949 770,966

Grant & contract receivables 2,650,102 270,563

Inventories 31,482 (54,629)

Notes receivable 1,277,478 610,559

Other assets (8,495,894) (345,330)

Accounts payable and accrued liabilites adjusted for

interest payable 5,104,541 4,708,259

Pension liability 4,533,805

Net change in deferred outflows (4,704,669)

Net change in deferred inflows

Accrued payroll 1,429,632 214,703

Compensated absences 2,280 163,673

Deferred revenue 1,252,759 954,361

Deposits (69,105) 145,550

Net cash used by operating activities (108,365,205)$ (90,355,194)$

SUPPLEMENTAL DISCLOSURE ON NON-CASH

TRANSACTIONS

Assets acquired through capital lease 1,750,809$ 56,227$

Expenses paid by capital lease/special assessment 83,800 298,290

Gifts of capital assets 690,000 14,100

Total non-cash transactions 2,524,609$ 368,617$


Statement of Appropriations

For The Biennium Ended June 30, 2015

UNIVERSITY OF NORTH DAKOTA

Original Final Unexpended

Expenses by line item: Appropriation Adjustments Appropriation Expenses Appropriation

Operating expenses 153,354,767$ (3,671,762)$ 149,683,005$ 149,683,005$

Capital assets 173,688,828 (84,207,683) 89,481,145 84,939,738 4,541,407$

Capital assets - carryover 2,661,000 2,661,000 2,661,000

Capital improve-off system

Purchase resident apt bldg 8,300,000 8,300,000 8,130,000 170,000

Student housing facility 19,187,262 19,187,262 19,187,262

Wilkerson renovation 15,000,000 15,000,000 5,325,980 9,674,020

College of Business reno 20,500,000 20,500,000 20,500,000

Indoor track football project 19,398,229 19,398,229 15,838,396 3,559,833

Law school renovation 2,507,448 2,507,448 1,665,907 841,541

SMHS skywalk 750,000 750,000 750,000

Collaborative energy project 15,500,000 15,500,000 461,977 15,038,023

Cap proj-off system-carryover

NDUS IT facility 4,334,030 4,334,030 3,811,943 522,087

Energy improve projects 191,482 191,482 191,482

Wilkerson hall project 13,809,867 13,809,867 13,809,867

Totals 327,043,595$ 34,259,873$ 361,303,468$ 286,519,295$ 74,784,173$

Expenses by source:

General fund 230,556,333$ 11,268,817$ 241,825,150$ 237,283,743$ 4,541,407$

Special fund 96,487,262 22,991,056 119,478,318 49,235,552 70,242,766

Totals 327,043,595$ 34,259,873$ 361,303,468$ 286,519,295$ 74,784,173$

Appropriation Adjustments:

Operating expenses The ($3,671,762) adjustment reflects a transfer to the University of North Dakota School of Medicine pursuant to 2013 SB 2003, section 33.

Capital assets The ($84,207,683) adjustment includes:

($82,387,262) transfer to the capital improvement off system line for: o Purchase resident apartment building - $8,300,000 o Student housing facility revenue bond- $19,187,262 o Wilkerson Hall revenue bond - $15,000,000 o College of Business – $20,500,000 o Indoor track football project - $19,500,000

($14,000,000) transfer to the capital project off system carryover line for Wilkerson Hall revenue bond.

$2,667,599 transfer from the NDUS for deferred maintenance allocation pursuant to SB 2003, section 21.


$7,798,196 increased special fund authority for phase II of the University of North Dakota School of Medicine facility project pursuant to SB 2003, section 28.

$1,813,785 transfer from the NDUS for the capital projects contingency pool. These funds were designated for the Law School renovation and addition ($505,828) and the University of North Dakota School of Medicine facility project ($1,307,957).

Capital assets carryover This adjustment reflects the unspent general funds from the prior biennium carried over pursuant to NDCC 54-44.1-11. These funds were designated for extraordinary repairs ($2,367,871) and the NDUS joint info. tech. building project ($293,129).

Capital assets off system These adjustments include:

Transfers from the capital asset line for special fund authorization for the following: o Purchase resident apartment building - $8,300,000 o Student housing facility revenue bond- $19,187,262 o Wilkerson Hall revenue bond - $15,000,000 o College of Business – $20,500,000 o Indoor track football project - $19,500,000 less $101,771 prior biennium

expenses.

$2,507,448 increase special fund authority for the Law School renovation approved by the budget section June 25, 2014.

$750,000 increase special fund authority for the School of Medicine skywalk project pursuant to SB 2003, section 27.

$15,500,000 increase special fund authority for a Collaborative Energy Center project approved by the budget section December 11. 2013.

Capital off system carryover These adjustments include special fund authority from the prior biennium carried over pursuant to NDCC 54-44.1-11 for the NDUS IT facility ($4,334,030) and energy improvement projects ($191,482). $14,000,000 transfer from the capital assets line for the Wilkerson Hall reauthorization less $190,133 prior biennium expenses.


MEDICAL SCHOOL

Original Final Unexpended

Expenses by line item Appropriation Adjustments Appropriation Expenses Appropriation

Operating Expenses 56,505,634$ 3,671,762$ 60,177,396$ 60,177,396$

Totals 56,505,634$ 3,671,762$ 60,177,396$ 60,177,396$

Expenses by source

General Fund 56,505,634$ 3,671,762$ 60,177,396$ 60,177,396$

Totals 56,505,634$ 3,671,762$ 60,177,396$ 60,177,396$

Appropriation Adjustments:

The $3,671,762 transfer was from the University of North Dakota pursuant to 2013 SB 2003, section 33.


Internal Control

In our audit for the biennium ended June 30, 2015, we identified the following areas of the University of North Dakota’s internal control as being the highest risk:

Internal Controls Subjected to Testing:

Controls surrounding the processing of revenues.

Controls surrounding the processing of expenses.

Controls effecting the safeguarding of assets.

Controls relating to compliance with legislative intent.

Controls surrounding the ConnectND (PeopleSoft) system.

Controls surrounding the surrounding capital construction and improvements.

The criteria used to evaluate internal control is published in the publication Internal Control – Integrated Framework from the Committee of Sponsoring Organizations (COSO) of the Treadway Commission.

We gained an understanding of internal control surrounding these areas and concluded as to the adequacy of their design. We also tested the operating effectiveness of those controls we considered necessary based on our assessment of audit risk. We concluded internal control was adequate.

Auditors are required to report deficiencies in internal control that are significant within the context of the objectives of the audit. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect: (1) misstatements in financial or performance information; (2) violations of laws and regulations; or (3) impairments of effectiveness or efficiency of operations, on a timely basis. Considering both qualitative and quantitative factors, we did not identify any significant deficiencies in internal control.


Compliance With Legislative Intent

In our audit for the biennium ended June 30, 2015, we identified and tested the University of North Dakota's compliance with legislative intent for the following areas we determined to be significant and of higher risk of noncompliance:

North Dakota University System reported to the appropriations committees of the sixty-third legislative assembly on the use of one-time funding for the biennium ending June 30, 2015 (2013 SB 2003, chapter 34, section 2).

The University of North Dakota transferred to the University of North Dakota School of Medicine and Health Sciences a minimum of 25% of the funding allocation from the higher education per student credit-hour funding formula (2013 SB 2003, chapter 34, section 33).

The University of North Dakota placed any unexpended balances in a sinking fund to be used for the retirement of indebtedness from the proceeds of bond issues for Wilkerson Hall and the resident apartment building (2013 SB 2003, chapter 34, section 37).

Proper use/approval of clearing account and petty cash/till funds (NDCC 54-06-08.1, Attorney General’s letter dated September 11, 1987 and Article X, Section 12, part 1 of ND Constitution).

BND used as credit card processing depository (NDCC 54-06-08.2).

Gifts, grants, and scholarship expenses were proper (Article IX, Section 1 of the North Dakota Constitution, NDCC 1-08-02, 15-10-12).

Fixed asset requirements were followed including surplus property, record- keeping, and lease analysis requirements (NDCC 54-44-04.6, 44-04-07, 54-27-21, 54-44.1-06, 54-27-21.1).

Expenses including proper voucher approvals (NDCC 44-08-05.1, Article X, Section 12, subpart 2 of North Dakota Constitution) and being within budgeted amounts (NDCC 54-44.1-09, Attorney General Opinion dated January 6, 1977).

Travel-related expenses are made in accordance with state statue (NDCC 44-08-04, 44-08-04.1, 04.2, 04.3, 04.4, 04.5, and 54-06-09).

Purchasing, including bidding and following sole source requirements (NDCC 54-44.4-01, 02, 05, 06, 54-44.7-02, 44-08-01).

Capital construction (NDCC 15-10-12.1, 48-01.2-02, 04, 05, 07, 09, 10, 13, 18, 19, 20, 21, 22, 25, 54-44.7).

Conflict of Interest (NDCC 12.1-13-03, 48-01.2-08).

Carryover of unexpended appropriations (NDCC 54-44.1-11).

Adequate blanket bond coverage (NDCC 26.1-21-08).

Unclaimed property laws (NDCC 47-30.1-02.1, 47-30.1-03.1).

Nepotism (NDCC 44-04-09).

Bond revenues and reserves (NDCC 15-55-03, 15-55-06).

Misapplication of entrusted property (NDCC 12.1-23-07).

The criteria used to evaluate legislative intent are the laws as published in the North Dakota Century Code and the North Dakota Session Laws.

Government Auditing Standards require auditors to report all instances of fraud and illegal acts unless they are inconsequential within the context of the audit objectives. Further, auditors are


required to report significant violations of provisions of contracts or grant agreements, and significant abuse that has occurred or is likely to have occurred.

The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. Thus, we concluded there was compliance with the legislative intent identified above.


Operations

In our audit for the biennium ended June 30, 2015, we identified the following areas of potential improvements to operations, as expressed by our operational objectives surrounding capital improvement projects greater than $250,000:

Are capital construction and improvement contracts authorized and awarded in compliance with applicable rules and regulations?

Are project expenses within the approved amounts and are revisions properly supported and approved?

Are payments to the contractor properly approved and in accordance with the contract?

Are construction in progress and capital assets properly reported and managed by qualified personnel?

We concluded that the operational objectives for capital improvement projects greater than $250,000 was operating efficiently and effectively.

You may obtain audit reports on the internet at:

www.nd.gov/auditor/

or by contacting the Division of State Audit

Office of the State Auditor

600 East Boulevard Avenue – Department 117 Bismarck, ND 58505-0060

(701) 328-2241

http://www.nd.gov/auditor/

GRAND FORKS, NORTH DAKOTA Audit Report

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Transcript of GRAND FORKS, NORTH DAKOTA Audit Report